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Business Transformation

Culture eats business strategy for breakfast

Wednesday, February 18, 2015

Well-documented surveys have confirmed that when large international ERP projects fail to provide the expected results and returns it is not by default an IT issue. Statistics shows that neither technology issues such as the ERP product itself, nor the application deployment is the main reason for failure. Does the problem lie in business strategy or is it elsewhere?

Why do ERP projects fail?

The main reasons are organizational challenges such as:

  • No buy-in from the receiving organization
  • Insufficient user training
  • No follow-up of performance after go-live
  • No incentives for users to make an effort

Some “old-timers” like me who have been around for a while may remember Peter Drucker, the 1950th management guru who invented the MBO (Management By Objectives) thesis and made unconventional statements like “Culture eats strategy for breakfast”. His theories were very relevant in the fifties and still highly relevant today when engaging in larger ERP projects.

The essence of MBO is participative goal setting, choosing course of actions and decision-making.

Management by objectives (MBO), also known as management by results (MBR), is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization in order to achieve them.  Peter Drucker first published the term “management by objectives” in 1954 in the book The Practice of Management.

Define clear objectives for your business strategy:

The MBO process consists of five steps:

  • Review organizational objectives: The manager/user gains a clear understanding of organization’s overall objectives.
  • Set worker objectives: The manager and user agree on objectives to be reached.
  • Monitor progress: At periodic intervals during the normal operating period, check to see if the objectives are reached.
  • Evaluating performance: At the end of normal operating period, the worker’s performance is judged by the extent to which the worker reached the objective.
  • Give reward: Rewards given to the worker based on the extent to which the objectives are reached.

As valuable today as when formulated more than 50 years ago! And very applicable to ERP projects: Culture could just as well easily derail a business relevant, well-designed and well-deployed ERP projects – like it does a business strategy. So when engaging in large ERP projects, make sure you have a strong buy-in from the receiving organization, make sure that the receiving organization knows and accepts the objectives, evaluate the performance before, during and after deployment and reward good performance.

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